Lots of action, few results

Wheat markets spent a lot of energy last week with little to show for it. Prices started last week with a strong day, traded sideways for three days, and then ended the week with a sell-off, leaving the price level just three cents higher than where it ended the week prior.

Both technical and fundamental factors had some influence. Technically, the US dollar was under pressure most of the week, falling back to near its lows, which offered some minor support for wheat. Wheat prices also paced sideways after testing the key .618 retracement of the October rally, and that level continues to offer significant support. On the negative technical picture, the market was unable to gain any traction after testing those supports, and upward momentum was quickly lost with the Friday sell-off.

Fundamentally, the corn and bean harvest are having a significant influence on wheat's price action. The weather finally broke and combines were full steam across the Midwest. Basis levels are under heavy pressure in many regions for both beans and corn, spilling over to futures pressure for all of the grains. Farmer selling for wheat has been slow, understandable considering they're trying to harvest and plant winter wheat, but the pressure in the row crops is too much to handle for a wheat market that isnâ€™t seeing enough business to support its own price.

Export sales were a paltry 284 TMT, the second notable poor performance in as many weeks. That's a pretty hard hit after seeing several weeks of above expectations. Egypt added to the disappointment this week with a purchase of 120,000 MT, split equally between France and Russia. Even with the weakening dollar, we've been unable to regain a foothold in the export market. On another GASC note, Egypt announced that they will now inspect their wheat cargos before they leave the port of origin, which makes better sense in case there are problems; and oh, yes, the seller will be paying the expenses of the inspector.

As of last week, total sales were only 55% of projections, well behind the 68% normally seen this time of year. It makes it increasingly likely that USDA will lower the export projections again, and we might even see it in this month's supply/demand report, due out on Tuesday. What we will likely see in the report is another increase in world wheat production, as more countries continue to adjust their estimates upward. We'll likely see an increase in world ending stocks as well.

Australia is in the early stages of their main harvest, and early reports out of New South Wales have been disappointing. Yields are below expectations and Australia has lowered NSW production by 1 MMT as a result, taking them to 4.5 MMT, down 18% from last year. They had their share of troubles this year, with dry conditions early only to be followed by a late frost. Western Australia appears to be on track for very good yields.

Winter wheat plantings are still lagging here in the US, but elsewhere appear to be full throttle. India expects record wheat plantings after a poor summer harvest, good autumn rains and a small increase in government support prices. Russia also announced that they expect their winter wheat plantings to also be a record; but much of their plantings were done in dry soil and emergence has been spotty as they head into their dormancy period.